Value Chain Transformation for Life Sciences

Accenture offers four steps for transforming supply chain management in life sciences companies.

Shorter product lifecycles, shrinking peak sales and heightened regulatory pressures have rendered the traditional life sciences supply chain an unaffordable luxury. As companies increasingly turn to unfamiliar emerging markets, a streamlined supply chain that can adapt to local regulations, cultural preferences and patient needs will be critical. Organizations must be able to deliver the right products to the right customers in a way that is efficient and generates returns quickly.

Value chain transformation can help life sciences companies achieve greater speed, efficiency and product certainty in today’s volatile market. Accenture maps out a blueprint for success.

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The life sciences industry is changing. Product lifecycles are decreasing, individual product revenues are shrinking and regulatory pressure is rising. According to the IMS Institute for Healthcare Informatics, generic drugs will account for 39 percent of market spending by 2015, up from 20 percent in 2005.

At the same time, the industry’s customers are evolving. Today, well-informed individuals, integrated provider networks, and government and other payers wield significant power over pricing. In the future, life sciences companies will increasingly turn to unfamiliar emerging global markets—each with their own regulations, cultural preferences, patient needs and public expectations.

The supply chain that many organizations have come to depend on is no longer effective.

To achieve successful value chain transformation, life sciences companies must recognize that:

• Customer demands alone should not drive the value chain. A value chain must provide value for all stakeholders and partners, not just consumers.

• One size does not fit all. No single value-chain solution will accommodate all of an organization’s products, markets and customers; a portfolio of value chains is needed.

• Value transformation requires “all hands on deck.” Executing and sustaining value transformation requires a concerted effort across the organization.

• Value changes over time. Organizations must continually monitor industry trends, customer needs and their own performance to keep pace with changes and stay relevant.

Accenture has identified four steps to help life sciences companies transform their value chains:

• Understand your organization’s competitive essence. It is not possible to compete on cost, speed and service. Organizations must choose one or two of these strategic imperatives, segment their customers and create customized supply chain responses for each group.

• Evaluate current supply chain performance. Once an organization has established its differentiation strategy, it must assess its supply chain to identify areas for improvement.

• Fill gaps in supply chain capabilities. Accenture has identified eight core capabilities that organizations need to deliver the right products quickly and efficiently.

• Measure performance over time. End-to-end performance management will help ensure that an organization’s value chain continues to improve over time.

Hussain Mooraj is the global lead for the Accenture Life Sciences Supply Chain practice, with more than 20 years of experience in manufacturing, supply chain, technology, sales and marketing, strategy and consulting. He works closely with senior executives from global companies across the health care value chain, including manufacturers, wholesalers, pharmacies, payers and providers, advising them on business strategy and technology best practices. In 2009, PharmaVOICE voted him one of the 100 most influential and inspiring individuals in life sciences.

Dr. Stijn-Pieter van Houten is part of Accenture’s Global Integrated Planning and Fulfillment group. He has worked with a diverse set of global clients on supply chain strategy and assessments, value chain transformations and supply chain segmentation. Dr. van Houten is based in Amsterdam.